The Art of the Inquiry: Why Questions are Your Best Investment
To unravel any complex concept, there is no tool more powerful than the ability to ask questions. In the intricate world of markets and investments, this ability is not just a skill—it is an essential survival tool. Over the years, I have observed that the primary differentiator between those who truly benefit from mutual funds and those who do not is the willingness to seek clarity through inquiry.
Lessons from the Minefield
My own understanding was forged in the heat of the early 1990s. Between January 1991 and April 1992, the Indian markets witnessed a spectacular bull run, with the Sensex soaring by nearly 300%. To the inexperienced eye, equity investing seemed like a “cakewalk,” blinding many to the brutal downslide that followed. At that time, there were no manuals or structured courses to guide investors through such volatility.
In those early days of mutual funds, the lack of regulatory depth allowed for schemes to assure returns despite inherent market risks. Thousands of agents, often lacking a true understanding of the products, peddled closed-end equity schemes to people who had no temperament for uncertainty. It was a recipe for disaster—a transition from the safety of fixed deposits into a minefield of risk. The only thing that guided me, and eventually my clients, through this period was a knack for asking questions.
There is No Such Thing as a “Silly Question”
If the goal is to clear a doubt, no question is foolish. I never hesitated to ask questions, even at the risk of appearing uninformed. I would challenge fund managers:
- What gives you the confidence to deliver returns better than a fixed deposit?
- How certain are you that there will be a buyer when you decide to sell your holdings?
- In a closed-end scheme, can an investor realistically find a buyer if they need to sell before maturity?
While the answers weren’t always perfect, they were enough to clear the haze and reveal the true nature of risk. Understanding risk is perhaps the most important lesson an investor can learn, and it is a subject too complex for textbooks alone to handle.
A Right and an Obligation
Even the U.S. Securities and Exchange Commission (SEC) emphasizes this in their publication, Ask Questions. They note that many investors could have avoided significant losses if they had simply asked basic questions from the start.
Arthur Levitt, a noted investment regulator, once remarked that while investors have the right to be treated fairly and get straight answers, they also have an obligation to ask questions. You must seek out information and contemplate your own tolerance for risk.
As you look toward the future, say “yes” to informed, careful, realistic, and skeptical long-term investing.